American consumer sentiment held up better than expected in early August despite a rise in coronavirus cases and gridlock in Washington, D.C.
The University of Michigan’s index of consumer sentiment rose slightly in the first weeks of August to 72.8 from 72.5 in July, beating the consensus forecast for a decline to 71.9. Consumer sentiment has been weak since the pandemic struck and is now just 1 point above the April low of 71.8. Compared with a year ago, the index is down 18.9 percent.
The index’s current conditions component declined three-tenth of a point to 82.5. The expectations component rose six-tenths to 66.5.
Despite the small gain in the index, consumers have become more pessimistic about the five-year economic outlook and confidence in economic policy has fallen to the lowest level of Donald Trump’s presidency. Even with the decline, however, confidence in policy remains well above the levels of the Obama administration.
“The policy gridlock has acted to increase uncertainty and heightened the need for precautionary funds to offset lapses in economic relief programs and to hedge against fears about the persistence and spread of the coronavirus as the school year gets underway,” said Richard Curtain, the survey’s chief economist.
Curtin said that consumers expect the bad economy to persist and that :the majority of consumers expect no return to a period of uninterrupted growth over the next five years.”
“Consumers anticipate declines in the national unemployment rate to significantly slow and expect a rising rate of inflation during the year ahead,” Curtin said.
The first weeks in August saw the enhanced unemployment benefits expire while lawmakers and the Trump administration failed to reach an agreement on a new round of coronavirus relief legislation. President Trump last week signed executive orders that suspended payroll taxes and boosted jobless benefits by up to $400 a week. New unemployment claims fell below one million for the first time since the pandemic struck.